Ranking Firms based on Manager's Biased Behavior and Investigating its Relation to Information Asymmetry using FAHP-Shannon Entropy-TOPSIS

Ranking firms solely based on financial ratios does not capture managements’ biased behavior in preparing financial information. The goal of this study is to introduce a model for firms’ financial reporting quality. the aim of the study is ranking firms based on managements’ biased (Opportunistic & Conservatism) behavior (i.e. Earnings management based on accruals, Real Earnings management, Earnings smoothing, Unconditional Conservatism, Conditional Conservatism) and investigating its’ relation to information asymmetry. To this aim FAHP-Shannon Entropy-TOPSIS have been used. 13 scholars of accounting have answered the FAHP questionnaire and 23 firms in the Pharmaceutical industry of Tehran Stock Exchange Market have been studied for the years 1390- 1396 (138) observations. Regression analysis has been used to calculate biased criteria. The results indicate Earnings smoothing is the most biased behavior in relation to information asymmetry based on scholars’ opinion and Shannon Entropy. The results show the least biased financial statements are the ones of Zagros, the most biased financial statements are the ones of Eksir Darou. However, TOPSIS scores of managements’ behavior has no relation with information asymmetry.